Multinational Management
Multinational Financial Management – Corporate Finance
CEMS
Elvira Sojli
RSM Erasmus University
Department of Finance esojli@rsm.nl Almost tautologically, international finance selects from the broad field of finance those issues that have to do with the existence of many distinct countries. The fact that firms operate in countries which operate as separate entities severely complicates a CFO’s life. Some, but by no means all, of the issues that arise due to multinational operations are:
National currencies, exchange rates and exchange rate risks;
The segmentation of goods markets along national lines, which in combination with price stickiness leads to the use of ‘real’ exchange rates; The fragmentation of equity markets between different countries, but also market providers;
Differences in national judicial systems which complicates bankruptcy, default proceedings and risk management in a unified framework;
The political autonomy of countries, which gives rise to political risk;
Separate and incompatible tax systems which give rise to double or triple taxation.
All these issues bring to bear in the decision making process of a CFO while handling the tasks of funding, evaluation, and risk. The CFO is required to acquire or have knowledge about international financial markets (equity, bond, and currency markets, as well as the markets for derivatives such as options and futures).
Internationally operating companies are exposed to specific risks that have to be dealt with by financial management. Therefore, the focus of this part of the course will be currency risk management: the measurement and control of international financial risks. Understanding international financial markets and financial risks provides a basis for important financial decisions: investment and finance decisions. The corporate finance part of the course contains the following topics: foreign exchange markets, parity conditions, currency
CEMS
Elvira Sojli
RSM Erasmus University
Department of Finance esojli@rsm.nl Almost tautologically, international finance selects from the broad field of finance those issues that have to do with the existence of many distinct countries. The fact that firms operate in countries which operate as separate entities severely complicates a CFO’s life. Some, but by no means all, of the issues that arise due to multinational operations are:
National currencies, exchange rates and exchange rate risks;
The segmentation of goods markets along national lines, which in combination with price stickiness leads to the use of ‘real’ exchange rates; The fragmentation of equity markets between different countries, but also market providers;
Differences in national judicial systems which complicates bankruptcy, default proceedings and risk management in a unified framework;
The political autonomy of countries, which gives rise to political risk;
Separate and incompatible tax systems which give rise to double or triple taxation.
All these issues bring to bear in the decision making process of a CFO while handling the tasks of funding, evaluation, and risk. The CFO is required to acquire or have knowledge about international financial markets (equity, bond, and currency markets, as well as the markets for derivatives such as options and futures).
Internationally operating companies are exposed to specific risks that have to be dealt with by financial management. Therefore, the focus of this part of the course will be currency risk management: the measurement and control of international financial risks. Understanding international financial markets and financial risks provides a basis for important financial decisions: investment and finance decisions. The corporate finance part of the course contains the following topics: foreign exchange markets, parity conditions, currency